If you have read “APYs” on bank documents and have no idea what it means, APY is the annual percentage yield. It is essential for banks to display the APY for a deposit account including certificates of Deposit and savings account. Annual percentage yield calculate will give an accurate idea about the return on your money in the year.
An APY is the interest amount that you earn on a deposit account in a year. It works under the assumption that there is no deposit or withdrawal of any funds throughout the year.
An APY includes the interest rate and the compounding interest frequency, which means the interest you earn on the principal plus the interest on your earnings.
APY will take into account various aspects to show you a clear picture of the earning potential. You need to understand the APY before you park your funds in the account. Higher the APY, more your money will grow in the year.
You need to understand that APY is very different from APR, hence always double-check which number you are looking at. Both the numbers are important but they are not the same.
They reflect different things and have a different impact on your fund. When you want to annual percentage yield calculate using an online calculator, remember to choose an APY calculator.
Do not choose an APR calculator because it can make a huge difference to the final result.
Annual percentage yield calculate
Before you put your money anywhere, it is best to work things out for yourself. Never make a decision solely on the information provided by the financial institution. It helps to do your homework and research for products where you can grow your money. APY will help you with the same. It helps to calculate the APY on the account you are considering.
You can calculate the APY using a paper and pen but it can get slightly complex. Even a minor error can change the result. Alternatively, you can create a spreadsheet for calculations but if you find it difficult, use the online calculator. It will give you an option to input different numbers to see its impact on the interest amount.
How to use the online APY calculator
The online calculator is simple and easy to use. The calculator is available for free and it can be found on most lender’s websites. For annual percentage yield calculate, all you need to do is input the information and you will get the answer within minutes. You will need three details- deposit amount, interest rate, and tenure.
Once you provide this information and enter “Calculate”, you will get the result within seconds. You can change the inputs in the calculator until you reach an optimal output.
Deposit: The starting amount for the CD.
Interest rate: The rate of interest on the savings account or the CD. Enter the actual interest rate and not the APY.
Tenure: The total tenure in months for the CD to mature.
Compounding: Compounding is the amount of interest earned on the accumulated interest of the CD. When you use an online calculator, you can choose the frequency that the interest income is received in the account.
It is important to understand that the more frequently it occurs, the sooner the accumulated interest income will generate additional interest. Different institutions have different criteria on how often the interest will be compounded on a CD.
It is best to check with the institution first.
Make the right decision
A lot of lenders provide clear information about the APY related to their account. This means you do not need to calculate it yourself and you can simply compare the difference it makes to your money.
The purpose of the calculator is to make it easy and convenient for you to understand the APY associated with a saving account or a CD. It will help make the right decision and you will put your money in the right place.
To conclude, APY has a significant impact on your wallet. When you are comparing two options with very close interest rates, then the one more frequently compounded will have a higher APY and will mean higher savings.
You will be able to notice a significant difference in the amount you save. Do not ignore what may look like a small percentage point because the numbers can add up in time.
Whenever you are making a comparison, consider the APYs of all the available options. This way you will be able to ensure that you get the most accurate understanding of the earnings.